Startup India Seed Fund Scheme

What is Form ADT-1?

Form ADT-1 is a mandatory filing under the Companies Act, 2013, used to inform the Registrar of Companies (ROC) about the appointment of an auditor in a company.

Key Points on Auditor Appointment & Filing Requirements

1. Appointment of First Auditor (New Companies)

For companies (excluding government companies):

The Board of Directors must appoint the first auditor within 30 days of incorporation.

If the Board fails to do so, the members must appoint the first auditor within 90 days at an Extraordinary General Meeting (EGM).

The first auditor holds office until the conclusion of the first Annual General Meeting (AGM).

Note: Filing Form ADT-1 is NOT required for the first auditor’s appointment. However, companies may choose to file it for compliance and record-keeping purposes.

2. Appointment of Subsequent Auditors

After the first AGM, companies must appoint an auditor for a five-year term (for private and public companies) or as per shareholder approval.

Form ADT-1 must be filed within 15 days of the auditor’s appointment to inform the ROC.

Timely filing of Form ADT-1 is crucial for companies to:

• Comply with legal requirements under the Companies Act
  
• Avoid penalties and legal consequences
  
• Maintain transparency in auditor appointments
  
• Ensure proper oversight of financial reporting
  

Who Needs to File Form ADT-1?

Is Form ADT-1 mandatory for all companies?

All companies incorporated under the Companies Act, 2013, are required to file Form ADT-1, including:

• Private Limited Companies
  
• Public Limited Companies
  
• One Person Companies (OPCs)
  
• Small Companies
  
• Dormant Companies
  

What happens if a company fails to file Form ADT-1?

Failure to file Form ADT-1 within the prescribed time can result in penalties and legal consequences for the company and its directors. The company may be fined between ₹25,000 to ₹5,00,000, and every defaulting officer may be punishable with imprisonment of up to 1 year, a fine between ₹10,000 to ₹1,00,000, or both.

Law Governing the Form ADT-1

The filing of Form ADT-1 is mandated under Section 139(1) of the Companies Act, 2013. This section requires companies to file the form with the ROC to inform them about the auditor's appointment, which is done after the AGM. The form contains essential details about the appointed auditor, such as their name, address, membership number, and date of appointment. Companies must submit Form ADT-1 within 15 days of the AGM to fulfil their legal obligations and avoid potential penalties for non-compliance.

Requirements for Filing Form ADT-1

• The company has appointed an auditor as per the provisions of the Companies Act, 2013
  
• The appointed auditor has provided written consent to act as the auditor
  
• The auditor has issued a certificate confirming they are not disqualified under Section 141 of the Act
  
• The company has obtained a Director Identification Number (DIN) for the signing director
  
• The signatory has a valid Digital Signature Certificate (DSC)
  

Companies must attach the necessary supporting documents, such as the board resolution for auditor appointment, auditor's consent letter, and certificate of eligibility while filing the form. Failing to meet these requirements can lead to the rejection of the form by the ROC.

Fees for Filing Form ADT-1

The filing fees for Form ADT-1 depend on the company's authorised share capital, as per the table below:

For LLP Companies without share capital, the filing fee is a flat ₹200.

Late filing of Form ADT-1 attracts additional fees, which increase based on the delay duration:

• Up to 30 days delay: 2 times the normal fees
• 31 to 60 days delay: 4 times the normal fees
  
• 61 to 90 days delay: 6 times the normal fees
  
• 91 to 180 days delay: 10 times the normal fees
  
• More than 180 days delay: 12 times the normal fees
  

Due Date For Filing MCA Form ADT-1

The due date for filing Form ADT-1 depends on whether the company is newly incorporated or existing:

For newly incorporated companies:

• ADT-1 for the first auditor must be filed within 15 days of the first Board Meeting
• This Board Meeting must be held within 30 days of incorporation, where the first auditor is appointed
  

For existing companies:

• Form ADT-1 should be filed within 15 days of the AGM where the auditor was appointed or reappointed
• Example: If the AGM was held on September 30, 2023, the ADT-1 due date would be October 14, 2023
  

While filing the form, companies must provide the following details about the appointed auditor:

1. Auditor's category (individual or firm)
2. Membership number of the auditor or firm's registration number
   
3. Address and email ID of the auditor
   
4. Permanent Account Number (PAN) of the auditor
   
5. Period of appointment
   
6. Membership number of the previous auditor in case of vacancy
   
7. Date of appointment and AGM date
   
8. Details of any casual vacancy (date and reason)
   

Along with these details, companies must attach the following supporting documents:

1. Certified copy of the Board Resolution for auditor appointment
2. Written consent of the auditor to act as such
   
3. Certificate by the auditor confirming their eligibility under Section 141
   
4. Copy of the intimation letter sent by the company to the auditor regarding their appointment
   

Penalty on Delayed Filing of Form ADT-1

Delayed filing of Form ADT-1 attracts penalties, which increase based on the duration of the delay:

• Up to 30 days delay: Twice the normal filing fees
• 31 to 60 days delay: Four times the normal filing fees
  
• 61 to 90 days delay: Six times the normal filing fees
  
• 91 to 180 days delay: Ten times the normal filing fees
  
• More than 180 days delay: Twelve times the normal filing fees
  

Companies must be mindful of the ADT-1 due date and ensure timely filing to avoid these escalating penalty fees. Repeated non-compliance can also lead to more severe consequences, such as fines and legal action against the company and its officers.

Important Points to Consider Regarding Form ADT-1

• Filing Form ADT-1 is mandatory for all types of companies, including private, public, and one-person companies.
• The responsibility of filing the form lies with the company and its directors, not the auditor.
  
• Form ADT-1 must be filed even in case of filling casual vacancies in the auditor's office.
  
• Companies should file Form ADT-1 for the appointment of the first auditor as well.
  
• Timely filing of the form with all necessary details and documents is crucial to avoid penalties and legal complications.
  

Process for Filing Form ADT-1

1. Obtain a Digital Signature Certificate (DSC) for at least one Director of the company from a licensed Certifying Authority
2. Ensure the signing director has a valid Director Identification Number (DIN)
   
3. Download Form ADT-1 from the MCA portal
   
4. Fill in the required company and auditor details accurately
   
5. Attach the necessary supporting documents (Board Resolution, auditor consent, eligibility certificate, etc.)
   
6. Verify the form using the director's DSC
   
7. Submit the form electronically on the MCA portal
   
8. Pay the requisite filing fees online using a credit card, debit card, or net banking
   
9. Receive an acknowledgement email from MCA as proof of filing
   

Frequently Asked Questions

Benefits of USA Company Registration

It is highly advisable to go for U.S. incorporation when aiming to raise capital from U.S. investors or penetrate the U.S. market with product sales. Beyond the inherent credibility associated with a U.S. business entity, it instills investor confidence and aligns with U.S. regulatory expectations.

• It boasts a thriving and a diverse business ecosystem, providing access to a vast market, diverse consumer base, and a network of established businesses and startups.
• Companies incorporated in the U.S. often find it easier to attract investment, whether through venture capital, private equity, or public markets.
• It is home to renowned innovation hubs such as Silicon Valley, which fosters creativity, collaboration, and technological advancement. This can be especially beneficial for tech startups and businesses in emerging industries.
• It offers a relatively straightforward process for business incorporation. Many states, like Delaware, have business-friendly regulations and efficient online platforms that facilitate the setup and management of companies.
• While the U.S. tax system is complex, businesses may find advantages in various tax incentives and deductions, especially if structured as certain types of corporations.
• It can serve as a strategic base for international expansion, providing a gateway to both North American and global markets.

Types for Company Registration in USA from India

The United States offers several types of legal structures for businesses, each with its own characteristics and implications. Here are some of the most common types:

•  Single-Person Businesses

•  S Corporations

•  C- Corporations (C-Corp)

•  Limited Liability Companies (LLCs)

•  Non-profit Organizations

Regarding U.S. business structures, two predominant forms of incorporation stand out: Limited Liability Companies (LLCs) and C-Corporations (C-Corps). These structures offer distinct features tailored to diverse business needs and goals.

• If you want lower compliance and small franchise fees: An LLC may be a suitable choice, especially for small businesses or startups with simpler structures and a desire for reduced administrative burdens.
• If you want to raise funds: If the goal is to attract external investment, issue stock, or go public in the future, a C Corporation is often more attractive to investors and provides the necessary flexibility for these activities.

Minimum Requirements to register a company in the U.S.

To register a company in the U.S., several essential criteria must be met.

• Minimum Number of Individuals:
  At least one person is required to register a company in the U.S. This person can act as the sole owner or be part of a group of owners (members or shareholders), depending on the chosen business structure (e.g., LLC, corporation).
• Registered Agent in Delaware:
  If choosing to register the company in Delaware, having a registered agent in the state is a legal requirement. The registered agent is a person or entity designated to receive legal documents, official correspondence, and other important information on behalf of the company.
• U.S. Address:
  A U.S. address is required for official correspondence and legal purposes. This address can be either a physical location (such as a brick-and-mortar office) or a virtual address, depending on the nature of the business and the chosen state of registration.

Documents required for U.S. Incorporation

A succinct breakdown of the documents needed for the initial stages of business registration.

• Name Approval:
  The process for name approval is straightforward. In Delaware, you can perform a real-time search for the desired business name and immediately reserve it if available. This reservation ensures that your chosen business name is secured for your use.
• Director Details:
  Provide details about the directors or members of the company. This typically includes full names, addresses, contact information, and roles or titles within the company.
• Number of Shares and Value Per Share:
  Specify the number of authorized shares the company is allowed to issue. Also, determine the par value or the assigned value to each share.

Process for Company Registration in the USA

Must-Have Documents After Incorporation

Here’s a list of documents that a business typically receives after the registration process:

1. Certificate of Incorporation

• This document, issued by the state authorities, officially recognizes the establishment of the corporation. It includes important details such as the company's name, location, and date of incorporation.

2. EIN (Employer Identification Number)

• The EIN is a unique identifier assigned by the IRS for tax purposes. It typically takes 3 to 4 weeks through standard processing, but an expedited option is available, reducing the timeline to 3 days if you already possess a Social Security Number (SSN).
  This unique identifier, similar to India's PAN (Permanent Account Number), is necessary for various business activities, including opening a bank account, hiring employees, and filing tax returns.

3. Bylaws of the Company (Similar to Articles of Association)

• Bylaws are internal rules that govern the operation and management of the company. They outline procedures for meetings, decision-making, and other essential aspects of corporate governance.
  In some ways, they are similar to the Articles of Association mandated in India.

4. Banking Resolution

• A banking resolution is a formal document that authorizes specific individuals within the company to open and manage bank accounts on behalf of the corporation. It provides clarity and legal authority for banking-related activities.

5. Common Stock Certificate

• Common stock certificates represent ownership in the company. When shares are issued, these certificates are given to shareholders as evidence of their ownership stake in the corporation. They typically include details such as the shareholder's name, the number of shares, and the date of issuance.

Compliances for U.S.- Incorporated Companies

Let's dive into the detailed aspects of compliance for businesses in the US, particularly those with C-Corporation structures and operations in Delaware.

1. Federal Income Tax

• The Federal Income Tax rate of 21% applies to C-corporations in the United States. They are required to file a tax return annually using the IRS Form 1120. This form outlines the corporation's income, deductions, credits, and taxes owed, etc.

2. Withholding Tax and Related Party Transactions Disclosure

• Similar to Tax Deducted at Source (TDS), withholding Tax in the U.S. involves deducting a portion of payments made to non-residents for services, dividends, or interest. Additionally, disclosure of related party transactions is a key compliance requirement, ensuring transparency in financial dealings with affiliated entities.

3. Delaware State Franchise Tax

• Delaware imposes an annual franchise tax on corporations, and the amount varies depending on the type and size of the corporation. The calculation is often based on factors such as authorized shares or assumed par value capital.

4. Delaware State Corporate Income Tax

• In addition to federal taxes, C-Corporations operating within the state of Delaware are subject to state corporate income tax at a rate of 8.7% on income generated within the state.
  To meet state tax obligations, C-Corporations file the Delaware Form 1100, providing detailed information on income, deductions, and other relevant financial data.

5. Other Regulatory Compliances in Delaware

• Beyond tax-related obligations, businesses in Delaware must adhere to additional regulatory requirements. This includes filing an annual report with the Delaware Secretary of State.

In a nutshell, be it India or the U.S., there will be a lot of compliances to keep a record of. By diligently meeting these obligations, you can fulfill legal mandates and contribute to a robust and trustworthy business environment.

Incorporation in U.S. vs India

When expanding operations from India to the United States, a common strategy involves incorporating a new U.S. company, followed by transferring shares from the Indian parent company (which must be a Private Limited Company) to the newly formed U.S. entity. The Indian company would become a subsidiary of the U.S. company, and there is no such limit to the number of subsidiaries an entity can have.

Keep in mind the compliances and FEMA guidelines to be adhered to during this process, which establishes the U.S. company as a subsidiary of its Indian counterpart, creating a legal and financial separation. The benefits of this approach include improved access to U.S. markets, legal autonomy for each entity, and strategic financial advantages.

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*Prices and documents can differ based on the company type.

Understanding Company Capital Structure in 2025

Authorized capital is the maximum amount of share capital that a company is authorized to issue, while Paid-Up Capital is the actual amount of share capital issued and paid for by shareholders.

A company's capital structure forms the bedrock of its financial framework. This structure shows how a business funds its operations by mixing equity and debt to create a roadmap for growth and stability.

What is authorized capital and how is it defined in MOA?

Authorized capital (also called nominal or registered capital) sets the maximum share capital a company can legally issue to shareholders. The company's Memorandum of Association (MOA) clearly defines this limit under the Capital Clause.

This capital acts as a regulatory boundary. A private limited company with an authorized capital of ₹10 lakh can't issue more shares beyond this amount unless it changes its MOA. The company needs shareholder approval for this change and must file it with the Registrar of Companies within thirty days.

Paid-up capital meaning and its role in equity funding

Paid-up capital is the actual money shareholders give to a company when they buy shares. Unlike authorized capital, this represents real money in the company's accounts that it can use for business operations.

The 2015 Companies Act amendment removed the minimum paid-up capital requirement. Now entrepreneurs can start with just ₹5,000. This money proves valuable because you don't need to pay it back like a loan. The paid-up capital also shows the company's financial health, how much it relies on equity, and its loan repayment capacity.

Why capital structure matters during company registration

A well-laid-out capital structure shapes a new company's operations and growth potential. Your company's capital structure during registration affects:

1. Financial flexibility - A smart capital structure lets you raise future funds without changing legal documents often.
   
2. Risk assessment - Investors and lenders look at your capital structure to check financial stability.
   
3. Registration costs - Your authorized capital amount decides the registration fees and stamp duty.
   

Companies should balance their original capital structure based on what their industry needs, how they plan to grow, and where they can get funding.

Authorized Capital vs Paid-Up Capital: Key Differences

Understanding the distinction between authorized capital and paid-up capital is fundamental to grasping a company's capital structure. This knowledge is crucial for effective corporate governance, regulatory compliance, and financial planning.

Legal Definitions and Compliance Framework

• Authorized Capital is the maximum share capital a company is legally permitted to issue, as specified in its Memorandum of Association (MoA). This acts as a ceiling, ensuring that the company cannot issue shares beyond this limit without amending its foundational documents.
  
• Paid-Up Capital is the actual amount of money received from shareholders in exchange for shares issued. By law, paid-up capital must always be less than or equal to authorized capital.
  

Impact on Share Issuance and Fundraising

• Authorized capital represents the company’s potential for raising funds, setting the upper boundary for share issuance. It provides flexibility for future fundraising and expansion without the need for immediate regulatory changes.
  
• Paid-up capital reflects the real investment made by shareholders and is the actual capital available for business operations. It is recorded in the company’s financial statements and directly impacts the company’s financial strength and investor confidence.
  

When a company reaches its authorized capital limit with paid-up capital, it faces two choices:

• Increase authorized capital through a formal amendment to the MoA, requiring shareholder approval and regulatory filings.
  
• Facilitate share transfers among existing and new shareholders, without increasing the total capital.
  

Capital Flexibility: Changes and Procedures

• Authorized Capital: Can be increased or decreased by amending the MoA, which involves:
  
  • Reviewing the Articles of Association (AoA) for relevant provisions.
    
  • Passing a board resolution to convene a shareholders' meeting.
    
  • Obtaining shareholder approval via an ordinary or special resolution.
    
  • Filing statutory forms (such as eForm SH-7 and eForm MGT-14) with the Registrar of Companies within the prescribed timeframe.
    
• Paid-Up Capital: Changes only when the company issues new shares or when existing shares are fully paid up. This directly affects the company’s liability for dividends and its operational capital.
  

Comparative Table: Authorized Capital vs Paid-Up Capital

How to Decide Capital Amounts for New Companies

You need a well-laid-out approach to calculate the right capital amounts for your new company. This helps balance your current needs with future growth. Here's how you can break this down into four practical steps:

Step 1: Estimate operational and contingency needs

Start with a financing plan that shows your startup costs. Your plan should cover equipment purchases, premises costs, inventory, and working capital needs for your first 6-12 months. You'll need enough buffer money to handle unexpected expenses that could disrupt your operations. Capital projects always face uncertainties, so you should set aside a contingency fund—about 30% of your total estimated needs—to maintain financial stability. This fund serves as your safety net against future uncertainties.

Step 2: Set authorized capital for future scalability

After you figure out your requirements, you should set your authorized capital at 5-10 times your original paid-up capital. This gives you room to raise funds later without changing your MOA. To cite an instance, see how a ₹2 lakh immediate paid-up capital works better with ₹10-20 lakh authorized capital to create flexibility. Keep in mind that authorized capital sets your fundraising limit but doesn't represent actual money you can use.

Step 3: Determine paid-up capital based on shareholder commitment

Your shareholders' realistic contribution becomes your paid-up capital—the actual money invested in your company. Most startups work well with paid-up capital between ₹1 lakh and ₹5 lakh, based on what their industry needs. The final amount should match both your immediate operational needs and your shareholders' risk appetite.

Step 4: Consider ROC fees and stamp duty implications

The regulatory costs change with different capital amounts. ROC filing fees increase as your authorized capital grows—from ₹4,000 for capital under ₹1 lakh to ₹1,56,000 plus extra fees when capital exceeds ₹1 crore. The stamp duty (usually 0.15% of authorized capital) applies when you register or increase capital. A 2021 Supreme Court ruling made this duty a one-time payment with a maximum cap, whatever the future capital increases might be.

Case Study: Capital Planning for ABC Pvt Ltd

Let's get into how ABC Pvt Ltd planned its capital structure to balance current costs with future growth needs.

Original capital structure: ₹10 lakh authorized, ₹1 lakh paid-up

ABC Pvt Ltd set up its capital framework with ₹10 lakh authorized capital against ₹1 lakh paid-up capital. The company followed the post-2015 Companies Act amendment that removed the minimum paid-up capital requirement. This 10:1 ratio creates a perfect balance. It gives enough operational funds through actual investment while leaving room for future growth without needing regulatory changes.

ROC fee effects based on capital tiers

The company thought about how fees work at different capital levels. ABC Pvt Ltd kept its authorized capital at ₹10 lakh to avoid higher fee brackets. The ROC fee stays around ₹35,000 plus extra charges for authorized capital under ₹10 lakh. The company would pay much more if they go beyond this limit - ₹1,35,000 plus ₹100 per ₹10,000 for capital between ₹50 lakh and ₹1 crore.

Flexibility for future share issuance without MOA change

ABC Pvt Ltd can issue extra shares worth ₹9 lakh without changing its MOA. This difference between authorized and current paid-up capital gives them room to grow. Going beyond the ₹10 lakh mark would need shareholder approval, a board resolution, an extraordinary general meeting, and filing Form SH-7 with the Registrar within thirty days.

Cost-benefit analysis of higher authorized capital

The company's capital planning shows smart financial thinking. The ₹10 lakh authorized capital balances several factors:

Current savings: Lower ROC fees and stamp duty (usually 0.15% of authorized capital) Future flexibility: Room to issue extra shares worth ₹9 lakh without paperwork Credibility advantage: Better stability in the eyes of potential investors and partners

ABC Pvt Ltd shows how smart capital planning helps long-term business goals while keeping initial registration costs low. This matters a lot for new companies with tight budgets.

Frequently Asked Questions